Adjusted EBITDA is income (loss) from operations, excluding the
impact of stock compensation, insurance recoveries and deductible
charges, depreciation and amortization, and gain or loss on disposal
of assets, and is inclusive of gain or loss from unconsolidated
affiliates. A reconciliation of net income (loss) per accounting
principles generally accepted in the United States of America
(“GAAP”) to adjusted EBITDA, as well as income (loss) from
operations per GAAP to adjusted EBITDA, is included in the
accompanying financial schedules.

(2)

The figures in this column present the guidance Penn National
provided on January 31, 2013 for the three months ended March 31,
2013.

Review of First Quarter 2013 Results vs. Guidance and First
Quarter 2012 Results

Three Months

Ended

March 31, 2013

Pre-tax

After-tax

(in thousands)

Income, per guidance (1)

$

111,978

$

68,306

East/West segment variance

1,985

1,216

Southern Plains segment variance

1,944

1,191

Midwest and Other segment variance

343

210

Spin-off transaction costs

(2,335

)

(1,398

)

Development costs

(1,916

)

(1,147

)

Liability based stock compensation charges

(3,436

)

(2,057

)

Loss on disposals

(2,324

)

(2,324

)

Other (2)

1,799

1,090

Tax rate variance from guidance

-

184

Income, as reported

$

108,038

$

65,271

Three Months Ended

March 31,

2013

2013 Guidance (1)

2012

Diluted earnings per common share

$

0.63

$

0.64

$

0.74

Spin-off transaction costs

0.01

-

-

Development costs

0.01

-

-

Liability based stock compensation charges

0.02

-

-

Loss on disposals

0.02

-

-

Other

-

-

0.01

Share count variance (3)

-

0.02

-

Gain on Hollywood Casino Tunica flood claim

-

-

(0.02

)

Diluted earnings per common share excluding items not included in
guidance

$

0.69

$

0.66

$

0.73

(1)

The guidance figures in the tables above present the guidance Penn
National provided on January 31, 2013 for the three months ended
March 31, 2013.

(2)

Includes a favorable variance of $0.9 million in stock based
compensation expense primarily due to a reduction in the amount of
awards granted and a delayed grant date, as well as a $0.8 million
favorable variance in depreciation expense.

(3)

The Company’s guidance excluded any reduction to our fully diluted
weighted average shares on our Preferred Stock resulting from Penn
National Gaming’s stock price exceeding $45. Since Penn National
Gaming’s stock price was $54.43 at quarter-end, this caused a 4.5
million reduction in the dilutive impact of our Preferred Stock.

“The overall adjusted EBITDA shortfall for the first quarter is
primarily attributable to the following higher expenses, specifically,
$2.3 million of REIT transaction costs, $1.9 million of development
costs for potential opportunities in Massachusetts, Philadelphia and
Sioux City and higher expenses of $3.4 million associated with our cash
settled employee stock appreciation rights and restricted stock units
due to the increase in our stock price.

“Penn National’s expanded scale and the continuous execution of
strategies to improve operating efficiencies, including rational
marketing and promotional activities, led to a consolidated first
quarter 2013 EBITDA margin of 27.65% which represents a 38 basis point
year-over-year improvement.

“We entered 2013 focused on completing the separation of the Company’s
operating assets from our real property assets through the creation of a
newly formed, publicly traded real estate investment trust (“REIT”)
while continuing to strategically expand and diversify our gaming
facility operating base. Carried out in tandem, these strategies are
expected to enhance shareholder value as we create two well-capitalized
companies, led by proven management teams, with each positioned for
near-term and long-term growth. We received a Private Letter Ruling from
the IRS related to the treatment of the separation and the qualification
of PropCo as a REIT, which is subject to certain qualifications and
based on certain representations and statements made by Penn National
Gaming, Inc.

“During the first quarter, we finalized necessary agreements with
holders of the Company’s Series B Redeemable Preferred Stock and
repurchased 225 preferred shares ($22.5 million par value) at a slight
discount to par. We also made initial presentations and began submitting
documentation to gaming regulators in all the jurisdictions in which we
operate. As such, we believe we remain on schedule to complete the
tax-free spin-off of the REIT to Penn National shareholders later this
year and to make the one-time taxable cash and stock dividend to Penn
National shareholders in January 2014, concurrent with the REIT election.

“Our development pipeline remains active and we recently announced an
agreement with the Jamul Indian Village whereby we will jointly develop
a Hollywood Casino branded casino and resort on the Tribe’s land in
trust, which is located approximately 20 miles east of downtown San
Diego, subject to receipt of certain local and National Indian Gaming
Commission approvals. The proposed $360 million development will feature
a 200,000 square foot three-story gaming and entertainment facility with
approximately 1,700 slot machines, 50 live table games including poker,
multiple restaurants, bars and lounges and a partially enclosed parking
structure with over 1,900 spaces. Based on the pace of approvals and
construction progress, the facility could open by early 2016 and upon
opening will generate management and licensing fees for Penn National.

“Elsewhere, we remain on schedule and on budget with the re-branding and
facility upgrade of Hollywood Casino St. Louis, which is expected to be
completed later this year, as well as the commencement of construction
of a 150 room hotel at Zia Park Casino which is expected to open in the
second half of 2014.

“In Ohio, we are in active dialog with the Ohio State Racing Commission
regarding seating capacity at the two VLT facilities planned for
Mahoning Valley and Dayton. As the nation’s leading operator of
pari-mutuel racing facilities, we share the commission’s deep commitment
to supporting horse racing, but believe our proposed seating plan more
accurately reflects current market demand. We are hopeful that a
resolution to this matter can be reached soon which will allow the
facilities to open as planned in 2014 and thereby generate the expected
employment and taxes for the state and local communities. We remain
committed to achieving reasonable returns on invested capital on these
projects and do not currently expect to proceed if the Ohio State Racing
Commission requires extraneous expenditures on portions of the facility
that detract from this objective.

“In Springfield, the United Food and Commercial Workers Union Local
1459, which is the largest union in Western Massachusetts, recently
announced an exclusive endorsement of our proposed $807 million,
single-phase, comprehensive economic development project in the City’s
North End. This endorsement of Hollywood Casino Springfield follows
agreements with other local labor entities, including the Pioneer Valley
Building and Construction Trades Council, Carpenters Local 108, and the
Community Works Building Trades Pre-Apprenticeship Program. Our proposed
project will generate 2,100 construction jobs and 2,400 permanent
casino-related jobs. We are currently engaged in discussions with the
City around the statutorily required Host Community Agreement and expect
those negotiations to conclude by early May. Meanwhile, at the State
level, we’re anticipating the Massachusetts Gaming Commission will
complete its suitability findings by mid- to late summer.

“In conclusion, the first quarter results highlight Penn National’s
ability to optimize results in challenging periods, our robust
development pipeline remains on track, and the Company’s planned REIT
conversion is expected to bring near- and long-term opportunities to
efficiently return capital and build new value for shareholders.”

Development and Expansion Projects

The table below summarizes Penn National Gaming’s current facility
development projects:

Project/Scope

New

Gaming

Positions

Planned

Total

Budget

Amount Expended

through

March 31,

2013

Expected

Opening

Date

(in millions)

Hollywood Casino St. Louis (MO) - Rebranding of former Harrah'sproperty
to our Hollywood Theme. Integration of new casino, hotel,financial
and operating systems and upgrades of slot machine product.

$61

$23.4

Ongoing through Fourth Quarter 2013

Mahoning Valley Race Track (OH) - Full details and design of theproject
at Austintown’s Centrepointe Business Park are in thedevelopment
stage, with a new Hollywood themed facility featuring anew
racetrack and up to 1,500 video lottery terminals, as well asvarious
restaurants, bars and other amenities.

1,000

$265 (1)

$10.7

TBD - Currently reviewing scope and timing of project

Dayton Raceway (OH) - Full details and design of the project at
thesite of an abandoned Delphi Automotive plant are
in the developmentstage, with our new Hollywood
themed facility featuring a newracetrack and up to
1,800 video lottery terminals, as well as variousrestaurants,
bars and other amenities.

1,500

$257 (1)

$8.2

TBD - Currently reviewing scope and timing of project

(1) Includes a $75 million relocation fee in addition to a $50
million VLT license fee.

Financial Guidance – Penn National Gaming, Inc.

The table below sets forth current guidance targets for financial
results for the 2013 second quarter and full year, based on the
following assumptions:

Increase of approximately $11 million in full year corporate overhead
primarily due to higher expenses associated with cash settled stock
based compensation awards based on our closing stock price at March
31, 2013. Excludes additional adjustments attributable to future stock
price fluctuations;

No disruptions to Penn National’s Argosy Casino Sioux City facility
arising from the ongoing litigation or regulatory proceedings;

A full year of the Casino Rama management contract;

Depreciation and amortization charges in 2013 of $307.9 million, with
$76.9 million projected to be incurred in the second quarter of 2013.
The decrease from prior guidance is due to certain assets being fully
depreciated and refined property estimates;

Estimated non-cash stock compensation expenses of $24.8 million for
2013, with $6.6 million of the cost incurred in the second quarter of
2013;

LIBOR is based on the forward curve;

A blended 2013 income tax rate of approximately 39.2%;

A diluted share count of approximately 102.9 million shares for the
full year 2013 (consistent with our first quarter 2013 share count).
This excludes the impact of any stock price changes from quarter-end
on the diluted weighted average shares per the terms of the Preferred
Stock or as a result of the exchange transaction with Fortress
Investment Group and our anticipated repurchase of the remaining
preferred shares; and,

There will be no material changes in applicable legislation,
regulatory environment, world events, weather, recent consumer trends,
economic conditions, or other circumstances beyond our control that
may adversely affect the Company’s results of operations.

Adjusted EBITDA is income (loss) from operations, excluding the
impact of stock compensation, insurance recoveries and deductible
charges, depreciation and amortization, and gain or loss on disposal
of assets, and is inclusive of gain or loss from unconsolidated
affiliates.

(2)

These figures present the guidance Penn National provided on January
31, 2013 for the full year ending December 31, 2013.

Reflecting the assumptions below and the cash flow from the 2013
financial guidance for Penn National Gaming, Inc. above, and if the
spin-off were to have occurred on January 1, 2013, PropCo would be
expected to generate adjusted EBITDA of $455.2 million and Adjusted
Funds From Operations (“AFFO”) of $284.4 million.

Significant changes in assumptions from the previous guidance issued on
January 31, 2013 are as follows:

A decrease in AFFO due to an increase in the assumed employee option
holder dividends that will be incurred by PropCo related to equity
awards. This was partially offset by lower income taxes from lower TRS
earnings due to a higher interest expense allocation;

We refined our allocation methodology for depreciation expense which
resulted in a decline in depreciation expense to $118 million from
$155 million;

A reduction in the fully diluted share count from 93.4 million common
shares to 92.7 million common shares outstanding for 2013 (which
excludes the impact of the pro rata share distribution associated with
the one-time dividend to shareholders of accumulated earnings and
profits) due to the following:

Conversion of Peter M. Carlino’s stock options to PropCo to solve
for the non pro-rata distribution for the Carlino Family;

A $37 million decrease in the Fortress Investment Group buy down
to $412 million intended to decrease Fortress’ ownership in PNG to
less than 10%;

A refinement in the calculation of the assumed proceeds amount
under the treasury stock method in calculating the diluted share
count impact of stock options;

Adjustments to the 2013 employee equity grants based on the
amounts actually granted; and,

A net increase in the basic share count resulting from the
exercise in the first quarter of 2013 of vested stock options.

The cash component of the E&P distribution (accumulated earnings and
profits attributable to any pre-REIT years to comply with certain REIT
qualification requirements) has remained relatively consistent at $438
million or approximately $5.00 per current Penn National Gaming common
share;

A decrease in the overall E&P dividend, from $1.4 billion to $1.1
billion due to finalization of anticipated Preferred stock buy backs,
refined estimates of asset values and accumulated earnings and
profits. This results in a decrease to the share component of the E&P
distribution to 0.29 additional PropCo shares, from the previously
assumed 0.48, per Penn National Gaming common share;

The ordinary dividend amount is calculated as 80 percent of AFFO less
the PNG option holder dividends. The proceeds from option exercises
are modeled to pay down PropCo debt. Additionally, the share count
utilized in the per share dividend calculation excludes the dilutive
impact of employee stock options; and,

An increase in the annual dividend to $2.44 per Penn National Gaming,
Inc. common share from $2.43 due to the factors described above.

Adjusted EBITDA is income (loss) from operations, excluding the
impact of stock compensation, insurance recoveries and deductible
charges, depreciation and amortization, and gain or loss on disposal
of assets, and is inclusive of gain or loss from unconsolidated
affiliates.

Reflecting the assumptions below and the 2013 financial guidance for
PENN above, and assuming the spin-off occurred on January 1, 2013, PNG
would generate approximately $406.7 million of adjusted EBITDA in 2013.

Significant changes in assumptions from the previous guidance issued on
January 31, 2013 are as follows:

An increase in the fully diluted share count from 83.8 million common
shares to 87.3 million common shares outstanding for 2013 due to the
following factors:

Conversion of Peter M. Carlino’s stock options to solve for the
non pro-rata distribution for the Carlino Family which results in
the Carlino Family retaining additional shares versus the previous
guidance;

A $37 million decrease in the Fortress Investment Group buy down
amount to $412 million intended to decrease Fortress’ ownership in
PNG to less than 10%;

A refinement in the calculation of the assumed proceeds amount
under the treasury stock method in calculating the diluted share
count impact of stock options;

Adjustments to the 2013 employee equity grants based on the
amounts actually granted; and,

A net increase in basic share count from the exercise of vested
stock options.

Excludes charges associated with PropCo options held by Penn National
Gaming employees which will be paid by PNG;

PNG’s rent expense is reduced by $5.1 million primarily due to a
slower than anticipated revenue ramp at Hollywood Casino Columbus. The
rent coverage ratio would be approximately 1.9x EBITDAR with actual
total leverage (total debt to adjusted EBITDA) of approximately 3.0x
and implied total adjusted debt leverage (inclusive of PNG’s
obligation under the Master Lease) of 5.6x; and,

Increased depreciation expense of $31 million as a result of
completing the first phase of our asset separation analysis between
PropCo and Opco.

Adjusted EBITDA is income (loss) from operations, excluding the
impact of stock compensation, insurance recoveries and deductible
charges, depreciation and amortization, and gain or loss on disposal
of assets, and is inclusive of gain or loss from unconsolidated
affiliates.

(2)

Adjusted EBITDAR is adjusted EBITDA less rent.

(3)

These figures present the guidance Penn National provided on January
31, 2013 for the full year ending December 31, 2013.

PENN NATIONAL GAMING, INC. AND SUBSIDIARIES

Segment Information – Operations

(in thousands) (unaudited)

NET REVENUES

ADJUSTED EBITDA

Three Months Ended March 31,

Three Months Ended March 31,

2013

2012

2013

2012

Midwest (1)

$

287,312

$

205,110

$

96,086

$

63,037

East/West (2)

317,048

370,629

92,537

106,012

Southern Plains (3)

184,684

149,720

58,692

53,886

Other (4)

9,202

10,600

(26,567

)

(22,195

)

Total

$

798,246

$

736,059

$

220,748

$

200,740

(1)

Our Midwest segment consists of the following properties: Hollywood
Casino Lawrenceburg, Hollywood Casino Aurora, Hollywood Casino
Joliet, Argosy Casino Alton, Hollywood Casino Toledo, which opened
on May 29, 2012, and Hollywood Casino Columbus, which opened on
October 8, 2012. It also includes our Casino Rama management service
contract and the Mahoning Valley and Dayton Raceway projects which
we anticipate completing in 2014. Results for the three months ended
March 31, 2012 included preopening charges of $4.7 million.

(2)

Our East/West segment consists of the following properties:
Hollywood Casino at Charles Town Races, Hollywood Casino Perryville,
Hollywood Casino Bangor, Hollywood Casino at Penn National Race
Course, Zia Park Casino, and M Resort. Results for the three months
ended March 31, 2013 included preopening charges of $0.2 million, as
compared to preopening charges of $0.3 million for the three months
ended March 31, 2012.

Our Other segment consists of our standalone racing operations,
namely Beulah Park, Raceway Park, Rosecroft Raceway, Sanford Orlando
Kennel Club, and our joint venture interests in Sam Houston Race
Park, Valley Race Park and Freehold Raceway. If the Company is
successful in obtaining gaming operations at these locations, they
would be assigned to one of our regional executives and reported in
their respective reportable segment. The Other segment also includes
our Bullwhackers property and our corporate overhead operations.
Results for the three months ended March 31, 2013 included corporate
overhead costs of $27.2 million, as compared to corporate overhead
costs of $22.1 million for the three months ended March 31, 2012.
Corporate overhead costs for the first quarter of 2013 included
higher liability based stock compensation charges of $3.1 million
compared to the corresponding period in the prior year, as well as
$2.5 million in development costs.

Reconciliation of Adjusted EBITDA to Net income (GAAP)

PENN NATIONAL GAMING, INC. AND SUBSIDIARIES

(in thousands) (unaudited)

Three Months Ended

March 31,

2013

2012

Adjusted EBITDA

$

220,748

$

200,740

Gain from unconsolidated affiliates

(1,721

)

(1,685

)

Depreciation and amortization

(77,071

)

(53,337

)

Charge for stock compensation

(6,251

)

(7,911

)

Insurance recoveries, net of deductible charges

-

3,863

(Loss) gain on disposal of assets

(2,390

)

945

Income from operations

$

133,315

$

142,615

Interest expense

(27,924

)

(18,043

)

Interest income

262

219

Gain from unconsolidated affiliates

1,721

1,685

Other

664

(1,003

)

Taxes on income

(42,767

)

(46,854

)

Net income

$

65,271

$

78,619

Reconciliation of Income (loss) from operations (GAAP) to
Adjusted EBITDA

PENN NATIONAL GAMING, INC. AND SUBSIDIARIES

Segment Information

(in thousands) (unaudited)

Three Months Ended March 31, 2013

Midwest

East/West

Southern Plains

Other

Total

Income (loss) from operations

$

63,796

$

69,107

$

37,009

$

(36,597

)

$

133,315

Charge for stock compensation

-

-

-

6,251

6,251

Depreciation and amortization

32,257

20,833

19,888

4,093

77,071

Loss (gain) on disposal of assets

33

2,597

58

(298

)

2,390

Gain (loss) from unconsolidated affiliates (1)

-

-

1,737

(16

)

1,721

Adjusted EBITDA

$

96,086

$

92,537

$

58,692

$

(26,567

)

$

220,748

Three Months Ended March 31, 2012

Midwest

East/West

Southern Plains

Other

Total

Income (loss) from operations

$

46,281

$

83,891

$

44,712

$

(32,269

)

$

142,615

Charge for stock compensation

-

-

-

7,911

7,911

Insurance recoveries, net of deductible charges

-

-

(3,863

)

-

(3,863

)

Depreciation and amortization

17,552

22,241

11,388

2,156

53,337

Gain on disposal of assets

(796

)

(120

)

(29

)

-

(945

)

Gain from unconsolidated affiliates (1)

-

-

1,678

7

1,685

Adjusted EBITDA

$

63,037

$

106,012

$

53,886

$

(22,195

)

$

200,740

1)

On February 3, 2012, our joint venture in Kansas Entertainment
commenced operations of Hollywood Casino at Kansas Speedway. We
record 50% of the joint venture’s earnings in our gain from
unconsolidated affiliates line in the Southern Plains column which
includes the impact of depreciation and amortization expense. Our
50% share of depreciation and amortization expense was $2.9 million
and $1.7 million for the three months ended March 31, 2013 and 2012,
respectively.

PENN NATIONAL GAMING, INC. AND SUBSIDIARIES

Consolidated Statements of Income

(in thousands, except per share data) (unaudited)

Three Months Ended March 31,

2013

2012

Revenues

Gaming

$

717,925

$

656,077

Food, beverage and other

121,860

112,908

Management service fee

3,047

3,443

Revenues

842,832

772,428

Less promotional allowances

(44,586

)

(36,369

)

Net revenues

798,246

736,059

Operating expenses

Gaming

362,018

340,169

Food, beverage and other

90,265

87,804

General and administrative

135,577

115,997

Depreciation and amortization

77,071

53,337

Insurance recoveries, net of deductible charges

-

(3,863

)

Total operating expenses

664,931

593,444

Income from operations

133,315

142,615

Other income (expenses)

Interest expense

(27,924

)

(18,043

)

Interest income

262

219

Gain from unconsolidated affiliates

1,721

1,685

Other

664

(1,003

)

Total other expenses

(25,277

)

(17,142

)

Income from operations before income taxes

108,038

125,473

Taxes on income

42,767

46,854

Net income

$

65,271

$

78,619

Earnings per common share:

Basic earnings per common share

$

0.68

$

0.83

Diluted earnings per common share

$

0.63

$

0.74

Weighted-average common shares outstanding:

Basic

77,553

75,994

Diluted

102,887

105,632

Diluted Share Count Methodology

Penn National Gaming is required to adjust its diluted weighted average
outstanding share count for the purposes of calculating diluted earnings
per share for its Series B Redeemable Preferred Stock (“Preferred
Stock”), which had 12,050 shares outstanding as of March 31, 2013, as
follows:

When the price of Penn National Gaming’s common stock at the end of
reporting period is less than $45, the diluted weighted average
outstanding share count is increased by 26,777,778 shares (regardless
of how much the stock price is below $45);

When the price of Penn National Gaming’s common stock at the end of
the reporting period is between $45 and $67, the diluted weighted
average outstanding share count will be increased by an amount which
can be calculated by dividing the $1.205 billion (face value) by the
current price per share. This will result in an increase in the
diluted weighted average outstanding share count of between 17,985,075
shares and 26,777,778 shares depending on the current share price; and,

When the price of Penn National Gaming’s common stock at the end of
the reporting period is above $67, the diluted weighted average
outstanding share count will be increased by 17,985,075 shares
(regardless of how much the stock price exceeds $67).

In connection with our proposed plan to separate our operating assets
and real property assets into two publicly traded companies through a
tax-free spin-off of our real estate assets to holders of our common
stock, an affiliate of Fortress Investment Group, owners of 9,750 shares
of Preferred Stock, has entered into an agreement to exchange their
Preferred Stock for non-voting common stock or equivalents at a price of
$67 per share or 14.6 million non-voting common shares or equivalents.
The non-voting common shares or equivalents would convert to Penn
National Gaming’s voting common shares upon sale to an unaffiliated
third party. Fortress may exchange its Preferred Stock for non-voting
common shares or equivalents at any time, but if Fortress does not fully
exercise its exchange right prior to the spin-off, any remaining
Preferred Stock will automatically be converted into non-voting common
shares or equivalents. In addition, Fortress may either divest 6.1
million of its 14.6 million non-voting Penn National Gaming common
shares or equivalents prior to the spin-off, or, if it does not, Penn
National Gaming has the right to repurchase the undisposed shares for
$67 per share.

In addition, the Company has signed an agreement with Centerbridge
Capital Partners, LP, pursuant to which the Company will repurchase
their 2,300 shares of Preferred Stock at par in advance of the spin-off.

Reconciliation of Non-GAAP Measures to GAAP

Adjusted EBITDA, or earnings before interest, taxes, stock compensation,
insurance recoveries and deductible charges, depreciation and
amortization, gain or loss on disposal of assets, and other income or
expenses, and inclusive of gain or loss from unconsolidated affiliates,
is not a measure of performance or liquidity calculated in accordance
with GAAP. Adjusted EBITDA information is presented as a supplemental
disclosure, as management believes that it is a widely used measure of
performance in the gaming industry. In addition, management uses
adjusted EBITDA as the primary measure of the operating performance of
its segments, including the evaluation of operating personnel. Adjusted
EBITDA should not be construed as an alternative to operating income, as
an indicator of the Company's operating performance, as an alternative
to cash flows from operating activities, as a measure of liquidity, or
as any other measure of performance determined in accordance with GAAP.
The Company has significant uses of cash flows, including capital
expenditures, interest payments, taxes and debt principal repayments,
which are not reflected in adjusted EBITDA. It should also be noted that
other gaming companies that report adjusted EBITDA information may
calculate adjusted EBITDA in a different manner than the Company.
Adjusted EBITDA is presented as a supplemental disclosure, as management
believes that it is a principal basis for the valuation of gaming
companies, as this measure is considered by many to be a better
indicator of the Company’s operating results than diluted net income
(loss) per GAAP. A reconciliation of the Company’s adjusted EBITDA to
net income (loss) per GAAP, as well as the Company’s adjusted EBITDA to
income (loss) from operations per GAAP, is included in the accompanying
financial schedules.

A reconciliation of each segment’s adjusted EBITDA to income (loss) from
operations is included in the financial schedules herein. On a segment
level, adjusted EBITDA is reconciled to income (loss) from operations
per GAAP, rather than net income (loss) per GAAP due to, among other
things, the impracticability of allocating interest expense, interest
income, income taxes and certain other items to the Company’s segments
on a segment-by-segment basis. Management believes that this
presentation is more meaningful to investors in evaluating the
performance of the Company’s segments and is consistent with the
reporting of other gaming companies.

Adjusted EBITDAR is adjusted EBITDA less rent expense.

Funds From Operations (“FFO”), is defined by NAREIT (the National
Association of Real Estate Investment Trusts, the trade organization for
REITs) as “the most commonly accepted and reported measure of REIT
operating performance.” FFO is equal to net income, excluding gains or
losses from sales of property and, adding back real estate depreciation.
Adjusted Funds From Operations (“AFFO”) is defined as FFO plus stock
based compensation reduced by maintenance capital expenditures. A
reconciliation of FFO and AFFO to net income (loss) per GAAP is included
in the accompanying financial schedules.

Notwithstanding the foregoing, PropCo’s and/or PNG’s measures of
adjusted EBITDA, adjusted EBITDAR, FFO and AFFO may not be comparable to
similarly titled measures used by other companies.

Conference Call, Webcast and Replay Details

Penn National Gaming is hosting a conference call and simultaneous
webcast at 11:00 am ET today, both of which are open to the general
public. The conference call number is 212/231-2930; please call five
minutes in advance to ensure that you are connected prior to the
presentation. Questions will be reserved for call-in analysts and
investors. Interested parties may also access the live call on the
Internet at www.pngaming.com;
allow 15 minutes to register and download and install any necessary
software. A replay of the call can be accessed for thirty days on the
Internet at www.pngaming.com.

This press release, which includes financial information to be discussed
by management during the conference call and disclosure and
reconciliation of non-GAAP financial measures, is available on the
Company’s web site, www.pngaming.com
in the “Investors” section (select link for “Press Releases”).

This press release contains forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995. Actual
results may vary materially from expectations. Although Penn National
Gaming, Inc. and its subsidiaries (collectively, the “Company” or
“PENN”) believe that our expectations are based on reasonable
assumptions within the bounds of our knowledge of our business and
operations, there can be no assurance that actual results will not
differ materially from our expectations. Meaningful factors that could
cause actual results to differ from expectations include, but are not
limited to, risks related to the following: the proposed separation of
PropCo from PENN, including our ability to timely receive all necessary
consents and approvals, the anticipated timing of the proposed
separation, the expected tax treatment of the proposed transaction, the
ability of each of the post spin Company and PropCo to conduct and
expand their respective businesses following the proposed spin-off, and
the diversion of management’s attention from traditional business
concerns; our ability to raise the capital necessary to finance the
spin-off, including the redemption of our existing debt and preferred
stock obligations, the anticipated cash portion of our special E&P
dividend and transaction costs; our ability to obtain timely regulatory
approvals required to own, develop and/or operate our facilities, or
other delays or impediments to completing our planned acquisitions or
projects, including favorable resolution of any related litigation,
including the appeal by the Ohio Roundtable addressing the legality of
video lottery terminals in Ohio; our ability to secure state and local
permits and approvals (including from the Ohio State Racing Commission)
necessary for construction; construction factors, including delays,
unexpected remediation costs, local opposition and increased cost of
labor and materials; our ability to successfully integrate Harrah’s St.
Louis into our existing business; our ability to reach agreements with
the thoroughbred and harness horseman in Ohio in connection with the
proposed relocations and to otherwise maintain agreements with our
horseman, pari-mutuel clerks and other organized labor groups; with
respect to the proposed Jamul project, particular risks associated with
securing financing, local opposition, and building a complex project on
a relatively small parcel; the passage of state, federal or local
legislation (including referenda) that would expand, restrict, further
tax, prevent or negatively impact operations in or adjacent to the
jurisdictions in which we do or seek to do business (such as a smoking
ban at any of our facilities); the effects of local and national
economic, credit, capital market, housing, and energy conditions on the
economy in general and on the gaming and lodging industries in
particular; the activities of our competitors and the rapid emergence of
new competitors (traditional, internet based and sweepstakes based);
increases in the effective rate of taxation at any of our properties or
at the corporate level; our ability to identify attractive acquisition
and development opportunities and to agree to terms with partners for
such transactions; the costs and risks involved in the pursuit of such
opportunities and our ability to complete the acquisition or development
of, and achieve the expected returns from, such opportunities; our
expectations for the continued availability and cost of capital; the
outcome of pending legal proceedings; changes in accounting standards;
our dependence on key personnel; the impact of terrorism and other
international hostilities; the impact of weather; and other factors as
discussed in the Company’s Annual Report on Form 10-K for the year ended
December 31, 2012, subsequent Quarterly Reports on Form 10-Q and Current
Reports on Form 8-K as filed with the SEC. The Company does not intend
to update publicly any forward-looking statements except as required by
law.